Technological innovations in ZCash

ZCash contains some unique privacy innovations that make its technology exciting and having the potential to shake the crypto-currency landscape. To explain how this new privacy technology works, let us start with Bitcoin…

The Bitcoin peer-to-peer network is designed to propagate and verify the transactions that users send across the network. Every node in the network (e.g. every desktop Bitcoin wallet) receives transactions, checks that they are “valid” and sends them on to other network nodes. If a transaction is found to be invalid/fraudulent, the respective network node disregards it. In order to be able to verify a transaction, every node in the network needs to know about all existing Bitcoin addresses and their current balance. This information is stored in the Bitcoin blockchain. All information in the blockchain is public. This fulfills the technical needs of Bitcoin but it partly works against user privacy.

Bitcoin addresses are pseudo-anonymous: whatever privacy Bitcoin provides comes from the fact that it is not usually known what person or entity owns a Bitcoin address. All transactions and monetary amounts transferred from/to an address are publicly available. In the early days of Bitcoin this kind of privacy was “good enough”. It can be enhanced by “mixing services” that attempt to obfuscate transactions etc. However more recently government (and other) agencies have developed advanced tools for blockchain analysis that can easily de-anonymize Bitcoin users. Such tools combine blockchain information with other externally gathered information and are typically quite successful in uncovering user transactions/balances.

ZCash is a technology coming to the rescue of user privacy. The main technical difference between ZCash and Bitcoin is that ZCash nodes, through advanced cryptographic technology have a way of verifying and relaying transactions without knowing the sender/receiver of the transactions or the amount of money being transferred. This breakthrough in privacy is made possible by cryptographic zero knowledge proofs. More detailed technical information is available in the ZCash FAQ.

What this means to end users: Ordinary users will be able to send and receive ZCash without their transactions being publicly visible. Only the sender and receiver will know the transaction details. This will give a huge boost to user privacy…